Taiwanese stocks fall from favour in face of mainland growth
Investors with fond memories of the 2005 Hong Kong listing of Foxconn International Holdings, the mainland-based handset unit of Hon Hai Precision, are still searching in vain for another Taiwanese firm to match its performance.
Taiwanese firms that had listed in Hong Kong in the past two years have fallen short of Foxconn's performance, with the shares of some dropping below their initial public offering price. This is in stark contrast to mainland-related companies that have gained 30 per cent to 40 per cent or even doubled in price on debuts.
'Most Hong Kong-listed Taiwanese companies that produce parts for computers and make communication and consumer electronic products have stable margins but slow growth,' said Kenny Tang Sing-hing, an associate director at Tung Tai Securities.
Mr Tang said Foxconn was successful as it was the world's biggest contract mobile-handset maker, with large orders from Nokia and Motorola, both of which also sold their products in the mainland.
'Most stocks that have become hot recently are related to the mainland's consumer market,' he said.
Foxconn shares, which have gained 500 per cent since the company's offering in February 2005, closed 0.43 per cent up to HK$23.20 yesterday.
The company has been a component of the benchmark Hang Seng Index since September last year.
Foxconn's net profit jumped 86 per cent last year to US$717.85 million after sales doubled sales in Asia. Revenue soared 63 per cent to US$10.38 billion.Taiwan-based firms are spinning-off their mainland units on the Hong Kong stock exchange because the government in Taipei limits investments by local firms in the mainland to a maximum of 40 per cent of their total assets, a source explained.
Within this year, three Taiwan-related companies are expected to list in Hong Kong, the source said, on the tail of eight initial public offerings in the past 12 months.
Among the eight recently listed, five have seen their shares prices fall at least once below their IPO levels while one failed to complete the share-sale process due to lawsuits.
3Cems Corp, the printed-circuit-board making unit of Taipei-listed First International Computer, failed to complete its IPO due to documentation problemsand in January 2005.
It tried to list again last December but dropped the offering after a lawsuit was filed against a subsidiary. It had planned to raise up to HK$427 million.
Shares in Tai-I International Holdings, China's fourth-largest bare copper-wire maker, which was listed in January, and in CapXon International Electronic, a manufacturer of aluminium electrolytic capacitors and key-pads that listed in May, closed below their offer prices yesterday.
Shares in Delta Networks, a Taiwan-based maker of switches and routers, had surged 21 per cent to close at HK$5.44 on their July 6 debut. By yesterday, they had declined to HK$4.85, only 7.7 per cent up on the offer price.
Meanwhile, mainland companies are proving more attractive to investors. Shares of China Communications Construction, a maker of equipment for highways, have gained 280 per cent from their offer price in December last year. Rare metal supplier China Molybdenum has soared 1.49 times since its April debut.
Investors are showing greater interest in toiletry and shoe companies than in Taiwanese technology firms.
Shares of Vinda International Holdings, a maker of toilet paper, have gained 38 per cent from their offer price earlier this month while Belle International, a shoe retailer, is up 47 per cent since its May flotation.
'Taiwanese firms have strong foundations but experienced a downturn in the computer, communication and consumer industries during the past two years, so it is reasonable that the shares of their mainland-based units didn't perform too well,' said a source. 'Recently these industries have begun to turn around.'
Foxconn International's share price gain since its initial public offering in February 2005 500%